Summer Budget 2015 – Landlords Reactions

Reply to the comment left by "mia scot" at "07/08/2016 - 19:43":

@Mia

I don't think your calculations are right, and are making the situation a lot worse than it will be.

Your current calculation i.e. pre-S24 are right

Post-S24
HMRC will deem your profit is £8,400 -£500 = £7,900 upon which it will charge you 45% tax = £3,555 (25 x £7,990 =£197,500 which makes you an additional rate taxpayer)
You will get an allowance on £4890 at 20% = £978
So total tax payable is £3,555 - 978= £2,577

After tax profit is therefore £8400-£500-£4890-£2577 = £433
across 25 properties this is 25 x £433 = £10,825 profit.

The effective tax rate on your actual pre tax profit is 85.6%

The figures do not take into account your personal allowance or any other income that you may have. In actually just across these 25 properties HMRC will deem you to be an Additional Rate Tax payer and tax you at 45% on your notional profits of £7,900 per property i.e. £3,555 but you'll probably only pay a proportion of this at 45%.

If you plugg your figures in the spreadsheet that is linked in the header to this thread you'll get a far more accurate indication.

Reply to the comment left by "NW Landlord" at "07/08/2016 - 20:27":

"more mortgage interest u have the more tax u pay"

NW Landlord, your above statement is factually incorrect. More rent you have more you pay in Tax, although, more mortgages you have you are likely to get more rent as you are likely to have more properties although you can be technically correct but factually "MORE RENT YOU HAVE MORE YOU PAY IN TAX"

For example, if you paid £50000 Interest but received no rent. You will not pay any Tax but will still offset 20% at basic rate of your tax which can be forwarded to following year as a loss. This is common misconception that more interest you have more you pay in tax in fact exact opposite is true. More Interest you pay less tax you pay!

Thanks for your comments and reminder of the calculator which I have inputted all my figures into:

Tax payable would go from £68,439 to £120,144
Take home down from £114,441 not that I ever got that lol) to £62,736

Biggest issue is the 45% rate which goes from (before tax relief on interest) £14,796 to £107,865!!!!!!!!

Any ideas on how to reduce this - is it a case of getting rid of half the portfolio and just keep the properties that are on the good 2.5% rates? no real incentive to keep the 25 at 4.95% as they will be major liabilities eating up any profit made from the better rate properties. I don't think they will accrue in value (haven't in the last ten years) and if the mass sell off comes about in a few years they could be worth a lot less than they are now.

All properties are owned jointly with my wife (which I appreciate will alter the figures above but not hugely) and we have always submitted a partnership return.

I am not keen on the trust idea nor the ltd company route as the rules may change there plus it costs as much tax to get the money out of the company into our pockets. Fine if you leave it there but what is the point of that.

Thanks government!

Do what Google, Amazon, Starbucks, et al do i.e. take your profits offshore.

http://www.thisismoney.co.uk/money/news/article-3408080/Crickhowell-Welsh-town-taking-Google-Amazon-Starbucks-takes-business-taxes-offshore.html

Hi Mia,

I think if you try using the first spread sheet again at the top of the main article >> https://www.property118.com/budget-2015-landlords-reactions/76164/
Using your figures you will be paying an additional £978 in tax per property as opposed to only being able to offset £978 of interest, but please do check again.

Daily Express has published an article titled: "Homeowners struggling with draconian tax bills" saying Landlords instead of Homeowners would have been more accurate but I imagine a lot of homeowners would read this as well.

http://www.express.co.uk/comment/expresscomment/697477/Homeowners-struggling-with-draconian-tax-bills

It is quite scathing on the "draconian" tax hikes.

Statement by Alan Ward, RLA regarding Jeremy Corbyn's proposals for rent controls

"Corbyn’s proposed ‘rent controls’ would be a ‘disaster for tenants’"
Alan Ward, RLA chairman, said: “Jeremy Corbyn’s call for rent controls would be a disaster for tenants. He is ignoring all history and experience which shows that where such controls are applied they choke off the supply of homes to rent, making it more difficult for tenants to access decent and affordable housing. This has previously been acknowledged by Labour’s former Minister responsible for housing in Wales.

“Rather than playing the populist tune, Mr Corbyn would do well to consider the facts. Figures in the English Housing Survey show that private sector tenants are spending an average of four years in their current property, up from 3.7 five years ago. Such tenants are also more satisfied with their accommodation than those in the social rented sector according to the same survey.”
https://www.landlordtoday.co.uk/breaking-news/2016/8/corbyns-proposed-rent-controls-would-be-a-disaster-for-tenants

The way I see it as interest rates rise so does your interest payments if you are on trackers. As you are being taxed on your mortgage interest then you will pay more tax maybe I'm reading it wrong but I'm sue you will pay more tax not less

Reply to the comment left by "Barry Fitzpatrick" at "08/08/2016 - 09:17":

Thank you for the link, Barry.

Today's "City a.m." publishes the following article: http://www.cityam.com/247045/heres-much-government-made-out-property-taxes-last-year?utm_source=newsletter&utm_medium=email&utm_campaign=160808_CMU

Treasure i making money on us and is set to make even more from S24. Will they listen to us or will they look at their account balance?

Grainger a large insitutional landlord wants SDLT on second homes for them scrapped suprise suprise but kept for induvidual landlords yet again more discrimination to give big boys unfair advantage yet again

http://www.telegraph.co.uk/property/renting/grainger-the-property-company-making-the-most-of-generation-rent/